Indonesia and coal

Since the early 1990's Indonesian coal mining in Indonesia has grown dramatically. The World Coal Institute estimates that in 2008 Indonesia mined 246 million tonnes of coal with just over 200 millions tonnes of this exported. 2008 coal exports comprised 173 million tonnes of steam coal and 30 million tonnes of coking coal. In 2009, Indonesia was the world's second largest coal exporter behind Australia and is a major supplier to Asian countries.

According to the 2010 BP Statistical Energy Survey, Indonesia had 2009 coal reserves of 4.3 billion tons. Almost a quarter (22%) of its production is exported to international markets. There are a number of companies eyeing coal reserves in Indonesia, including BHP Billiton, China Investment Corp, Coal India, Reliance Power, and the Shenhua Group, among others.

In December 2010, Indonesia's government said it forecasts coal output to increase by 19 percent in 2011. Zacks investment research estimates that more than 90% of the estimated 3.5 billion metric ton coal demand growth in Asia is expected to come from Indonesia in the next 20 years.

Coal Reserves
According to the 2010 BP Statistical Energy Survey, Indonesia had 2009 coal reserves of 4328 million tons, or 0.52% of the world total. In January 2005 Rubianto Indrayuda, the Deputy Director on Coal Mining Services at the Indonesian Ministry of Energy and Mineral Resources stated in a presentation to a APEC Clean Fossil Energy Technical and Policy Seminar that 49% of the country's coal resources were classified as being low quality (<5100 cal/gram), 26% as being of medium quality ((5100-6100 cal/gr) and 24% as high quality (6100-7100 cal/gr). He stated that there were 12,466 million tonnes of measured reserves, 20,533 of indicated reserves and 24,314 million tonnes of inferred reserves.

Coal Exports
In April 2011, Coal Age reported that Indonesian coal miners expect to dig up 340 million metric tons (mt) of coal in 2011, an increase of 23% from 275 million mt in 2010. Of the planned 340 million mt of coal produced in 2011, the association estimates 20% of it—around 70 million mt—will be allocated to domestic market demand, while the remaining 80% will be exported, primarily to Japan, China and South Korea, which are estimated to remain the largest importers of Indonesia’s coal.

ABARE, an Australian government economic modelling and statistics agency, stated that in 2009, Indonesia exported approximately 200 million tonnes of thermal coal with the recovery in Asian economies likely to "support an increase in exports to around 210 million tonnes". ABARE estimates that in the period to 2015, Indonesia thermal coal exports could increase to approximately 250 million tonnes.

In a 2005 presentation, Rubianto Indrayuda from the Ministry of Energy and Mineral Resources estimated that Indonesian coal exports would be approximately 124 million tonnes in 2010 and peak at 128 million tonnes in 2015. That exports were far far higher within a few years. ABARE stated that "key expansion projects supporting increased exports include Bumi Resources’ plan to expand its KPC and Arutmin mines from 53 million tonnes in 2009 to 111 million tonnes by 2013 and PT Adaro Energy’s plan to increase its mine capacity to 80 million tonnes by 2014."

In an earlier review on the global coal trade, ABARE analyst Alan Copeland noted that thermal coal exports from Indonesia were estimated to have grown by approximately 33% in 2004, 2005 and 2006: "The growth in Indonesia’s exports reflects the ability of its coal industry to respond to the rapid growth in Asian demand for thermal coal, supported by unconstrained transport and port capacity. A significant proportion of coal transport in Indonesia is water based, which allows for coal to be transported along rivers via barges to the open sea for loading on to larger vessels."

There has also been a rise in illegal mining. In September 2005, the Washington Post reported on coal-laden trucks -- which are notionally banned from public roads -- going all-night from "from scores of often-illegal mines" on their way to a local port.

In June 2006 ABARE listed the main destinations for Indonesian thermal coal as being :
 * Japan (approximately 25%);
 * Chinese Taipei (17%)
 * India (15%); and
 * the Republic of Korea (13%).

Copeland notes that India imports Indonesian low-ash coal for blending with its higher-ash content domestic coals.

In 2008, nearly one million tons of Indonesian coal was burned at the Bridgeport Harbor power plant in Bridgeport, Connecticut.

Exports to China
Between 2000 and 2007, Indonesian coal deliveries to China increased by 157%. In August 2010, China's sovereign wealth fund, China Investment Corporation (CIC) announced that, in order to "secure more resources in Southeast Asia and benefit from increasing trade in the region" it would "plough" US$2 billion into coal, electricity and port projects in Indonesia. No time limit was given for fulfilling these objectives, but CIC said it was interested specifically in three Indonesian state firms: the coal mine company PT Tambang Batubara Bukit Asam; the state electricity company, PLN; and port operator, Pelindo.

Domestic Coal Consumption
The Indonesian government sees its role as encouraging and providing for a rapid expansion in the domestic consumption of coal. In a 2005 presentation, a government official projected that total domestic coal consumption would grow from 30.6 million tonnes in 2003 to 95.6 million tonnes in 2020. The largest component of the rapid projected growth was in coal-fired power generation with consumption projected to grow from 22.9 million tonnes in 2003 to 72 million tonnes in 2020.

However, while the government was keen to promote the exploitation of the country's coal resources, there were substantial challenges. Some of these, Rubianto Indrayuda stated, were that most of the coal is "classified as low rank coal which requires specific treatments for its utilization" and that most of the coal deposits were in areas remote from existing infrastructure. He also flagged that there were other problems too such as "weak" law enforcement resulting in illegal coal mining, conflicting roles between national and regional governments. He also stated that the "regulation classifying mining waste as hazardous material" was a major problem."

National Coal Policy
Sixty percent of Indonesia's total electricity demand is met by burning coal. Since 2000 the Indonesian government, faced with at least a short to medium-term decline in domestic oil and gas production, has adopted a policy of attempting to diversify its domestic energy sources. In January 2004 the Indonesian government announced its National Coal Policy which aims to boost the development of coal-fired power stations and dramatically increase coal exports. This policy co-incided with Indonesia becoming a net oil importer.

While approximately 8% of Indonesia's electricity is generated from hydropower, further developments are likely to be limited due to the high capital costs, limited infrastructure and environmental and social concerns. While the country currently has no operating nuclear power stations, in March 2008 the State Minister for Research and Technology, Kusmayanto Kadiman, optimistically proclaimed that the government would build four 1,2000 megawatt nuclear power stations in the next 17 years. It is proposed that the first of the plants would be operational by 2016/2017. However, with strong local opposition to nuclear power, it is uncertain how far the proposals will progress.

Domestic Coal-Fired Power Stations
Between 1993 and 2003 there has been a 78% growth in domestic power generation capacity. (See Indonesia and coal/Installed electrical generating capacity). According to the WCI just over 48% of the capacity is from coal-fired power stations. In 2004 31 million tonnes of coal was used in power generation with a further 10 million tonnes for direct use by industry.

The rapid increase in coal-fired generating capacity is set to continue. The Indonesian Government has stated its intention to extend access to electricity from approximately 65% (2006 figures) to 93 per cent by 2025. ABARE noted in early 2010 that "meet this target, 57 gigawatts of electricity generating capacity is planned to be built over this period."

PT Perusahaan Listrik Negara (PLN), the state-owned electricity utility, has proposed plans to add an additional 10,000 megawatts of coal-fired capacity by 2011 as phase one of reaching the government's target. It also plans a further 10,000 megawatts, beginning in 2011, as phase two of the electrification project.

However, the U.S. government's Energy Information Administration is sceptical that the proposals, which seek private sector involvement, will come to much. "However," the EIA wrote in a review of Indonesia's energy generation sector, "foreign investors have largely avoided the Indonesian power sector in recent years due to the poor financial condition of PT PLN and the uncertain regulatory climate in the electricity sector." However, one driver of increased domestic coal consumption will be plans by PLN to convert a number of oil-fired power stations to coal-fired.

The most recent power stations that have come online are:
 * the first 300 megawatt unit of the Cilacap power station; and
 * the 1.3 gigawatt Tanjung Jati B power station

Other coal-fired power stations in operation are:
 * Paiton I power station in eastern Java.

Coal-fired power stations financed by international public investment institutions
Coal-fired power stations financed by international public investment institutions include:


 * Bangko Tengah power station, Indonesia
 * Banjarsari power station, Indonesia
 * Indramayu power station, Indonesia
 * Tanjung Jati B power station, Indonesia
 * Paiton I power station, Indonesia
 * Paiton II power station, Indonesia
 * Purwakarta Indorama power station, Indonesia
 * Plant in South Kalimantan, Indonesia
 * Rembang power station, Indonesia
 * Tarahan power station, Indonesia

Proposed New Coal-Fired Power Stations
Proposed power stations included in PLN's ambitious "Acceleration of Coal-Based Power Plant Construction Project", as listed in the company's 2006 annual report are;


 * Paiton 3 power station

Citizens Groups Tracking Mining in Indonesia

 * Indonesian Forum for Environment WALHI (Friends of the Earth Indonesia) http://www.eng.walhi.or.id/eng
 * Indonesian Mining Advocacy Network JATAM http://www.jatam.org/english/

Major Indonesian Coal Companies
The U.S. Geological Survey lists major Indonesian coal mining companies as including
 * Adaro Indonesia 22 million tonnes in 2006
 * Kaltim Prima Coal 36 million tonnes in 2006
 * Kideco Jaya Agung 12 million tonnes in 2006
 * Arutmin Indonesia 11 million tonnes in 2006
 * Berau Coal 13 million tonnes in 2006
 * Bukit Asam 19 million tonnes in 2006

The World Coal Institute also includes Indominco Mandiri in its list of major producers.

UK's Vallar buys Indonesian coal companies
In November 2010, investment company Vallar combined with 25 percent of Indonesian coal producer PT Bumi Resources and 75 percent of PT Berau Coal Energy. Vallar founder Nathaniel Rothschild said the $3 billion takeover will make Vallar the biggest exporter of coal to China.

Peabody buys coal from Indonesian mines
In December 2010, coal producer Peabody Energy signed a deal to receive coal from PT Supra Bara Energi (SBE) in Indonesia. The coal from SBE's mine in East Kalimantan will be exported to customers located in the Asian Pacific Rim through Peabody's COALTRADE international Singapore trading hub. Over the next five years, Peabody plans to supply several million tons of coal from SBE's Indonesian mine.

In February 2011, Peabody Energy said it had reached an agreement to source two million tons of coal for export from Indonesia's PT Cahaya Energi Mandiri. The financial terms of the deal were not disclosed. The coal will be secured over two years from a mine in East Kalimantan. Peabody has secured three term deals in recent months that account for 5.5 million tons of Indonesian coal.

India's MIEL buys mine in Sumatra
In March 2011, it was reported that India's Monnet Ispat and Energy (MIEL) plans to acquire PT Sarwa Sembada Karya Bumi’s thermal coal mine in Sumatra, Indonesia, for $24 million. The mine is 25,000 hectares in the East Asian nation’s Jambi province, and is thought to be one of the largest thermal coal deposits in the world. According to coal ministry estimates, the coal deficit being faced by Indian power utilities is expected to double to 104 mega tons (MT) in the next fiscal year. MIEL's wholly-owned subsidiary Monnet Global (MGL) said it has so far explored about 1,500 hectares of the total lease area and was able to establish 65 million tonnes of coal reserves. MIEL is currently working on a 1,700 MW thermal power plant in Orissa and plans to put up one more plant of 1,300 MW capacity in Gujarat or Tamil Nadu. Orissa is expected to take another 3 years to go online.

PHI
In April 2011, PHI Energy - a minority owned subsidiary of PHI Group - said it had signed an asset purchase agreement to acquire coal mine assets from PT Dian Anugrah Pratama (DAP), an Indonesian corporation with headquarters in Jakarta. PHI Energy Corporation will acquire an estimated mineable coal reserve of 10,000,000 metric tons located in an area of approximately 423 hectares, at Kecamatan Kapur IX, Kabupaten Lima Puluh Kota, Propinsi Sumatera Barat, Indonesia, from DAP in exchange for 20,000,000 shares of common stock of PHI Energy Corporation valued at $1.00 per share. PHI Group engages in M&A advisory services, real estate development, mining, and energy. PHI Energy Corporation was founded in 2005 as Providential Oil & Gas, Inc., and has been engaged in oil and gas joint ventures with various U.S. companies in Texas and California, and is a majority owned subsidiary of AXN Group, a global investor in oil & gas, forestry/timber, and mining.

On May 31, 2011, PHI Energy announced it had closed the coal asset purchase agreement with PT DAP. PHI Energy issued promissory notes for US $3,000,000 and 47 million shares of common stock of the company, valued at $1.00 per share, in exchange for total estimated mineable coal reserves of 33,000,000 metric tons located in West Sumatra, Kampar and South Kalimantan, Indonesia. The pre-production estimated value of the reserves is approximately US $85 million. Allen Wu, Chairman of PEC, said, "The acquisition of DAP marks a milestone in implementing PEC's vision to own and operate a global basket of coal mines strategically located in Indonesia, Colombia, Canada, South Africa, Philippines and Mongolia. We intend to balance a portfolio with producing mines with proven reserves with greenfield projects."

Proposed coal plants
In January 2011, it was announced that Indonesia expects to operate a coal-fired power plant in Central Java valued at 3 billion U.S. dollars by 2016 following recent enactment of a presidential decree and a finance ministerial decree guaranteeing law umbrella on infrastructure projects conducted by the government and private sector. Bambang Dwiyanto, public relation manager of PT Perusahaan Listrik Negara (PLN),a state-run power company, told reporters that the decrees will allow PLN to resume competitive tendering for the power plant: "Hopefully, a power purchase agreement contract between PLN and independent power projects (IPP) could be signed in the middle of this year so that the coal-fired power plant of Central Java could operate by 2016," said Dwiyanto. According to Dwiyanto, PLN conducted pre-qualification tender in Nov. 2009 and seven foreign investors met the qualifications: Mitsubishi, a consortium of GDF Suez and J-Power, a consortium of International Power and Mitsui, Marubeni, and others.

Proposed coal mines
The Maruwai Coal Project, a joint venture between BHP Billiton (75%) and Adaro Indonesia (25%) proposes to develop seven 'Coal Contracts of Work' (CCoWs) located in East and Central Kalimantan in Indonesia. The proposed coal mines held by the joint venture are :
 * Lampunut coal mine
 * Haju coal mine
 * Luon coal mine
 * Bumbun coal mine
 * Juloi Northwest coal mine

Coal-bed methane blocks
In November 2010, Indonesia said it will offer 12 coalbed methane blocks to investors in January 2011 as part of the country's efforts to reduce reliance on oil- based energy, according to director general of oil and gas at the Ministry of Energy and Mineral Resources Evita Legowo. She said in a seminar that five blocks will be offered via direct tender, and the remaining seven via regular tender. The five blocks are the Sinjunjung Blok in West Sumatra, Kutai Barat Block and Kutai Timur Block in East Kalimantan, and the Kapuas I and Kapuas II blocks in Central Kalimantan. The seven blocks are Kampar I, Kampar II, Pelalawan I and Pelalawan II in Riau, and Melak-Mendung I, Melak-Mendung II and Melak-Mendung III in East Kalimantan.

Futures market
In December 2010, Intercontinental Exchange said it will introduce a European contract for coal from Indonesia, the IHS McCloskey Indonesian Sub-Bituminous contract, which will begin trading in early 2011. The company is the second-largest U.S. futures market.

Related SourceWatch articles

 * Indonesia's Coal: local impacts - global links
 * Indonesia's geothermal potential
 * Indonesia and nuclear power
 * Indonesian Coal Mining Association
 * Celukan Bawang power station
 * China Huadian Corporation
 * Global use and production of coal
 * Australia and coal
 * Britain and coal
 * China and coal
 * Colombia and coal
 * Germany and coal
 * Japan and coal
 * New Zealand and coal
 * South Africa and coal
 * Tata Ultra Mega
 * United States and coal
 * Very low sulphur coal

Reports

 * Rubianto Indrayuda (Deputy Director on Coal Mining Services, Directorate General of Geology and Mineral Resources, Ministry of Energy and Mineral Resources, "Indonesia's Coal Policy toward 2020: prospect and implementation", Presented at APEC Clean Fossil Energy Technical and Policy Seminar, Cebu City, Philippines, 26-29 January 2005.
 * Dr. Simon F. Sembiring, Director General of Mineral Coal and Geothermal, "Low rank coal business opportunity in Indonesia", Presentation to the Asia Pacific Symposium on Lower Rank Coal Bandung, September 6 –7, 2006.
 * Mr. Bambang Hartoyo (Deputy Director, Production and Marketing, Directorate of Managing Mineral and Coal Enterprises Development, Ministry of Energy and Mineral Resources (MEMR), Indonesia), "Outlook of Indonesian Domestic Coal Supply and Demand Toward 2025", Asia Pacific Economy Cooperation (APEC) Clean Fossil Energy Technical and Policy Seminar, Horizon Hotel, Hanoi, Vietnam, 6 – 8 February, 2007.
 * Yoshihiko Nakagaki (Chairman, Japan Coal Energy Center and President, Electric Power Development Co., Ltd.), "Future of Indonesian Energy Coal and Japanese Involvement", Presentation in Tokyo, March 27, 2009.
 * JATAM, London Mining Network and Nostromo Research, Indonesia's Coal: local impacts - global links, Down to Earth newsletter, Number 85-86, August 2010. (Pdf)
 * Bart Lucarelli, "The History and Future of Indonesia's Coal Industry: Impact of Politics and Regulatory Framework on Industry Structure and Performance," Stanford Program on Energy and Sustainable Development, Working Paper #93, July 2010

Archive of articles

 * Down To Earth, "Coal", Down to Earth website, accessed March 2010. (This is a link to an online archive of reports and articles by Down to Earth. Most of the material relates to coal projects in Indonesia.)

External Articles

 * International Energy Agency, "Coal in Indonesia in 2005", International Energy Agency website, accessed June 2008.
 * U.S. Geological Survey, Indonesia 1994-2006
 * World Coal Institute, "Indonesia", World Coal Institute website, accessed June 2008.
 * U.S. Embassy, Jakarta, "Indonesia Coal Reports", 2000-2004.
 * Alan Sipress, "Indonesia's Illegal Coal Mines Feed China: Demand Transforms Island Nation's Lightly Regulated South Kalimantan Province", Washington Post, September 21, 2005; Page D06.
 * Tom McCawley, "Indonesia plays power catch-up", Asia Times Online, March 19, 2009.
 * "Indonesia's coal: local impacts - global links," special issue of Down to Earth, August 2010; PDF at http://dte.gn.apc.org/85-86.pdf
 * "Coal in East Kalimantan: Taking the Toxic Tour," Down to Earth, March 2010